AIG 2009 Annual Report Download - page 120

American International Group, Inc., and Subsidiaries
intent to refocus on its core businesses, in late 2008 AIGFP began to unwind its businesses and portfolios, including
those associated with credit protection written through credit default swaps on super senior risk tranches of diversified
pools of loans and debt securities.
Historically, AIG’s Capital Markets operations derived a significant portion of their revenues from hedged financial
positions entered into in connection with counterparty transactions. AIGFP has also participated as a dealer in a wide
variety of financial derivatives transactions. Revenues and pre-tax income of the Capital Markets operations and the
percentage change in these amounts for any given period are significantly affected by changes in the fair value of
AIGFP’s assets and liabilities and by the number, size and profitability of transactions entered into during that period
relative to those entered into during the comparative period.
Consumer Finance
AIG’s Consumer Finance operations in North America are principally conducted through AGF. AGF derives most
of its revenues from finance charges assessed on real estate loans, secured and unsecured non-real estate loans and
retail sales finance receivables.
AIG’s foreign consumer finance operations are principally conducted through AIGCFG. AIGCFG operates
primarily in emerging and developing markets. At December 31, 2009, AIGCFG had operations in Argentina, Poland,
Taiwan, India and Colombia. During 2009 and through February 17, 2010, AIG has completed the sale of the
AIGCFG operations in China, Thailand, the Philippines, Mexico, Hong Kong, Brazil, Russia and Taiwan. AIG has
also entered into contracts to sell the AIGCFG operations in Argentina, Colombia and Poland.
Financial Services Results
Financial Services results were as follows:
Percentage Increase/(Decrease)
Years Ended December 31,
(in millions) 2009 2008 2007 2009 vs. 2008 2008 vs. 2007
Revenues:
Aircraft Leasing $5,288 $ 5,075 $ 4,694 4% 8%
Capital Markets 662 (40,333) (9,979) - -
Consumer Finance 3,096 3,849 3,655 (20) 5
Other, including intercompany adjustments 530 314 321 69 (2)
Total $9,576 $(31,095) $ (1,309) -% -%
Pre-tax income (loss):
Aircraft Leasing $1,385 $ 1,116 $ 873 24% 28%
Capital Markets 180 (40,471) (10,557) - -
Consumer Finance (985) (1,261) 171 - -
Other, including intercompany adjustments (63) (205) (2) - -
Total $ 517 $(40,821) $ (9,515) -% -%
2009 and 2008 Comparison
Financial Services reported pre-tax income in 2009 compared to a very significant pre-tax loss in 2008 primarily due
to the following:
• AIGFP reported unrealized market valuation gains related to its super senior credit default swap portfolios of
$1.4 billion in 2009 and unrealized market valuation losses of $28.6 billion in 2008. The operating results in 2009
and 2008 include net gains of $2.8 billion and net losses of $9.3 billion, respectively, representing the effect of
changes in credit spreads on the valuation of AIGFP’s assets and liabilities, including credit valuation
adjustment gains of $52 million and $185 million, respectively, reflected in Unrealized market valuation gains
(losses) on AIGFP super senior credit default swap portfolio. Interest expense on intercompany borrowings and
AIG 2009 Form 10-K 112